El Cerrito’s Credit Rating: A Story of Fiscal Decline

When El Cerrito’s current city manager assumed office, the city held an AA credit rating, a mark of financial stability and prudent management. Fast-forward to today, and the city is hanging on to a BBB rating, a stark drop that raises serious concerns about financial governance and the city’s economic future. This decline reflects poorly on management and places El Cerrito at significant financial risk, as it teeters just above junk bond status.

What Does a Credit Rating Mean?

A credit rating is a measure of a city’s ability to meet its financial obligations. Higher ratings, such as AA-, signal low credit risk and responsible fiscal management. Lower ratings, like BBB, indicate a greater risk of default, higher borrowing costs, and reduced investor confidence.

For El Cerrito, the AA- rating represented a time when the city was seen as financially healthy and capable of funding essential services and future projects. Now, the BBB rating tells a very different story, one of financial instability, rising debt, and questionable budget practices.

The Decline: A Timeline of Fiscal Missteps

When the city manager took over, El Cerrito was on relatively solid financial ground. However, over the years, several key decisions have contributed to the erosion of the city’s creditworthiness:

1. Uncontrolled Spending: Budgets have consistently run deficits, with expenditures far outpacing revenues.
2. Lack of Transparency: Reports and audits have pointed to insufficient oversight and a lack of clear financial strategies.
3. Poor Financial Planning: Reserve funds, intended to serve as a buffer during economic downturns, have been depleted.

In 2020, the city’s credit rating plummeted to BBB- near-junk status, reflecting the consequences of these ongoing issues. While the BBB rating indicates a slight improvement, it remains alarmingly low and reflects persistent fiscal challenges.

The Cost to Residents

The drop in El Cerrito’s credit rating isn’t just a technical financial issue—it has real-world consequences for residents.

• Higher Borrowing Costs: The city pays more to issue bonds for infrastructure projects, meaning less money for roads, parks, and public safety.
• Risk to Essential Services: Financial instability threatens funding for critical services like police, fire, and public works.
• Decreased Investor Confidence: With a lower rating, fewer institutions are willing to invest in the city’s bonds, further limiting resources.

A Call for Accountability

Residents and stakeholders in El Cerrito should demand better financial management from their city leaders. The current situation is unsustainable, and the path forward requires:

• Transparent Budgeting: Regular public updates on the city’s financial health and decision-making processes.
• Strategic Cost Reductions: Thoughtful cuts to spending without compromising essential services.
• Rebuilding Reserves: Establishing and adhering to a disciplined savings plan.

Your Voice Matters: Hold El Cerrito’s Leadership Accountable

El Cerrito residents, your city needs your voice now more than ever. As the city faces ongoing financial challenges and struggles to regain stability, it’s crucial that your concerns are heard by those in charge. The City Council must know that you demand transparency, accountability, and action to address the issues that have led to the city’s alarming decline in financial health.

How to Make Your Voice Heard

You can directly address the City Council by submitting your comments to the City Clerk. Here’s how:

1. Write Your Comments: Share your concerns, questions, or suggestions regarding the city’s financial management, priorities, and leadership.
2. Submit Your Comments: Email or call the City Clerk’s Office with a request to include your comments in the City Council packet.
3. Ensure Public Visibility: By submitting your comments to the official City Council packet, your message becomes part of a public document that must be made available to all residents.

Contact the City Clerk

Send your comments to:

• Email: cityclerk@ci.el-cerrito.ca.us
• Phone: 510-215-4305

Be sure to include your name, contact information, and a clear request for your comments to be added to the City Council packet.

The Time for Action is Now

Residents like you are the key to driving change. By speaking up, you can ensure that El Cerrito’s leadership prioritizes fiscal responsibility, transparency, and the well-being of the community.

Can El Cerrito Recover?

The city’s financial future depends on strong leadership and a commitment to reform. While regaining an AA- credit rating may be a long-term goal, even incremental improvements in fiscal management can restore confidence and stabilize the city’s finances.

El Cerrito’s decline from AA- to BBB serves as a cautionary tale for other cities. For El Cerrito, it is a wake-up call—a reminder that fiscal health requires not just words but meaningful action.

Let’s work together to secure a brighter future for El Cerrito. Your voice matters—make it heard!